Discover the Best Way to Shop for a New Car Loan

August 29, 2008

Shopping for a new car when your old one is about to give up isnt most peoples idea of a good time. Its not deciding what kind of car you want thats the problem. Most people are able to think seriously and be realistic about what kind of car they can afford to own. Theyll happily settle for a sedan, even if they dream of a sports car.

However, your credit might get in the way. If youve got less than great credit, car dealers can make you feel like a second class citizen. They dont want to take the risk of selling you the car you need, so they steer you towards other, less desirable models. They dont want to waste their time on you if you are not going to qualify for financing.

Very few people have perfect credit these days. Theres always an occasion where you miss a few payments on a credit card or other bill, or get laid off from your job and have to put off the least vital bills. However, even if things are now different and you can deal with your financial responsibilities, youll still have that black mark on your credit.

Credit bureaus can keep the information about those missed payments on your record for a long time. When you start investigating your options for financing your new car, theyre sure to turn up. This means that youre on the defensive, and have to relive the period when you werent able to live up to your responsibilities. Its necessary for you to explain to the dealership what happened, why you werent able to make those payments, and to justify your ability to make them now. Heres some information to help you do this more easily.

The first thing you should do is realistically figure out how much you can afford for your new car payment. Dont make the mistake of being too optimistic about your ability to save money or reduce expenses. Buying a new car shouldnt affect your quality of life. If its necessary to stretch your budget that thin, you should put off getting a new car until things improve.

When you are realistically figuring out your budget, remember that cars do not drive on air. You will need to put gas in them and it would be a good idea to set aside money every month for maintenance like tires, oil changes, etc.

Also, its important to retain a good sense of reality in regards to how much youll get when you trade in your car. You probably wont get the blue book price. For instance, if your car is worth $6000 as a trade in, realize that this is only $6000 off the sticker price of the new car. If you receive a discount on the sticker price (rarely do people ever pay the sticker price!), you probably wont get as much for your trade-in. Sometimes the amount that the dealer discounts your trade in turns out to be the same as if youd paid the sticker price in the first place.

However, should you be able to work things out with your dealer and arrive at a fair price, you still need to shop for a new car loan. Even if youre getting a good deal on your trade in vehicle, youll almost certainly need to borrow money to buy a new car. What kind of loan you get is almost as important as picking out the car.

If you happen to have a good credit rating, you can often get a good deal on your new car financing through the dealer. Theyll use the manufacturers lending resources to help find you the right financing. The best deal you can get is a zero percent finance rate. Theres no interest with a zero percent rate. You can also get one point nine or two point nine percent interest rates, which are a lot better than you can get through most other lenders. Therefore, if you can get a good deal through the dealer, you should probably go for it.

However, those with less than perfect credit may need to look at other options for their new car financing. You may be able to find attractive loan programs through other lenders. These programs are designed for people with a few credit problems. You can even get loans designed for people with very poor credit or even those whove filed bankruptcy. However, you should be careful with these kinds of loans. Slipping up with them can put you in line for lots of fees and penalties, and the interest rate is going to be higher because they will consider you a higher risk.

Remember, when you buy a new car, shopping for the right car loan is just as important as picking out the perfect car. If you go with the first financing youre offered, you may find yourself paying several thousand dollars more than you would have if you had bothered to shop around. Dont underestimate the value to you of getting the right financing. Theres an option available for you, no matter what your credit history looks like.

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